China has introduced a 100 percent tariff on Canadian imports, leading to a surge in rapeseed meal futures prices. The Zhengzhou Exchange raised trading margin requirements to manage market volatility. Experts indicate that while short-term effects may be minimal, the long-term implications of the tariffs require scrutiny.
On Tuesday, the Zhengzhou Exchange increased trading margin requirements for certain rapeseed meal futures contracts from 7 percent to 9 percent. This adjustment follows China’s imposition of a 100 percent tariff on Canadian imports, which has resulted in a significant two-day price rally, elevating prices to their highest level in five months.
The most actively traded rapeseed meal futures contract rose by 7.23 percent, closing at 2,684 yuan per metric ton. This follows an impressive 6 percent gain in the previous session, marking prices not seen since September 2024.
The new trading margin changes will take effect from the settlement date of March 12. On Saturday, China announced a surprise 100 percent tariff affecting over $1 billion worth of Canadian rapeseed oil, oil cakes, and pea imports, along with a 25 percent duty on $1.6 billion in Canadian aquatic products and pork.
These tariffs have triggered increased market volatility, necessitating the exchange to enforce stricter margin rules to mitigate potential risks. Previously, on Monday, the exchange raised the minimum order size for rapeseed meal futures contracts to limit participation from smaller investors in an effort to stabilize prices.
Data from Chinese customs reveals that, in 2024, China imported 2.02 million tonnes of rapeseed meal from Canada, constituting 73 percent of its total imports. Other principal suppliers for rapeseed include the UAE, Russia, and Ukraine.
A trader based in China remarked, “After tariffs, importers may face losses and contract defaults. Spot supply is sufficient now, but reduced imports could tighten future supply. Demand for rapeseed meal may need to be curtailed while monitoring shifts in the global trade chain.”
The Agriculture Ministry, in its monthly report, stated, “In the short term, this is expected to have minimal impact on the domestic supply of edible vegetable oils. However, the long-term effects of the trade policy implementation will require further attention.”
In conclusion, China’s recent trade tariffs on Canadian imports have ushered in a wave of market volatility, compelling the Zhengzhou Exchange to revise trading margin requirements for rapeseed meal futures. The increased tariffs have significant implications for importers and domestic markets, with experts suggesting that while immediate effects may be limited, the long-term outcomes necessitate careful observation.
Original Source: www.business-standard.com
